The Market has Distinct Trading Pattern : Phil Orlando

expect next for stocks? Typically stocks rally into and during the earning season, depending force on the results of specific companies. Here to tell us about earnings and market valuations is Matt Forrester. He's the chief investment officer for b n Y Melon Lockwood Advisers. He helps to oversee nearly eight billion dollars. Is based in King of Prussia, Pennsylvania. Matt,

thanks very much for in with me. You know, one of the one of the things that that always sort of is interesting is if you take a look at a chart of the SMP five hundred, let's just use that as a as a proxy, you can kind of tell when earning season takes place without even knowing what the dates are, what the calendar is on the bottom of the of the chart, because it seems that we have this pattern that has almost been ingrained in investor behavior.

Have you noticed this as well? Absolutely, since since of the stock market gains have occurred during this earning season, and this one has been absolutely spectacular. Uh, course driven by the tax cuts, but we've had a remarkable earning season um and we've also seen analysts begin to pick up their expectations for future quarters going into the next you know, rest of and in the twenty nineteen. So

we've clearly had some some really remarkable corporate results. Uh. Interestingly, the markets have not always in every visual case of certain cases where they have looked at these earnings and then looked at the guidance and look deeper. So I think it's fair to say that a lot of the good earnings number have been widely anticipated. But we've continued to have gains in markets, and we've sort of powered through this other levels of risks that we've seen every

markets or the last few a few months. All right, we'll get to the risks in a second. But this notion that we see these gains, as you said, of the gains seemed to come in this in this specific time period. If you're an investor and you're looking for a time to get in, do you wait until the earning season is over, see what people are doing in terms of maybe taking some short term profits, and then go and prospect for the stocks the companies that you

really want to own. Yeah, it could be. I suspect that we're going to have a summer where some of the issues that have recently cropped up UH and some of the risks are probably gonna give us these periodics buying opportunities. So if you're looking to make large new allocations to perhaps the equity market, you may want to see how that affects the overall macro picture. So clearly you've had the Italian news, which you know had some stuff just like it's right, but it gives you those

buying opportunities that are very short lived. I think those are very hard for UH, for market players to adjust

to UM. But if you look at those lists we ascaren February on average hourly earnings U, you know, it's somewhat crazy for markets to respond to a three tents of a of a increase from expected number and average hourly earnings, but it got the markets worried about the things that we might see in inflation, whether the FED was behind a curve, you know, raise questions about whether or not monetary policy was have to go even tighter, uh,

you know, for more quickly than what the markets have expected. And when we see those types of fears work their way through the markets, UM, that's going to give us those periodic trade opportunities to the calendar there, you know, from here to the mid terms is going to be filled with these trade issues, which we're going to be ongoing. Uh, We're going to be continue to dealing with some of

the European populism and what's what's arisen from the Italian crisis. H. On the backdrop of that, that was gonna be a lot of really good earnings numbers, you know, coming from from American corporation. So we're hoping that that is going to power us through these isolated events. Um. But there are real structure of reasons why investors should be somewhat concerned about Italy, the third largest bondasher on the planet, eighth largest economy around the world, twelfth largest by purchasing

power parity concept. Uh. You know, if there are challenges to European populism. H those things are going to have an effect on on the Eurozone. Um, we're gonna have to power through these trade issues. The structural um connections between the U. S and China are really big. This is a really big deal. Uh, they are you know, we have more connections than any set of geopolitical or business rivals and maybe in the twentieth century. So we need to work through this. I think the structure probably

means that we will tread carefully. But in so many of these things, markets are dealing with issues that are largely opaque. They may not be able to have a visibility. We don't know as market players what the Italian government, new populistic Italian government really wants to do. I don't think the new Italian necessarily. Maybe we've gotta We're limited in time, and I want to give you about thirty

seconds here too. What do you specifically focused on in terms of where you're putting money to work right now? So I think because of these successes here as the risks, you have to think about your portfolio as an overall whole. You should have some pieces of your portfolio that may act as ballast. Uh. You know to help help keep the ship afloat when these periodic risk events continue to hit us. And for me that means gold, it means some amount of exposure to a long term high grade debt.

We can't do this in all of our portfolios, but where we can, we try to isolate some places where we can have some pieces of ballast. Uh US small caps may be less exposed to some of the events going on overseas. For all those things, those kinds of things that we're for him to put into some for portfolios today. Thank you very much for being with me. You got Matt Forrester, Chief Investment Officer b n Y Melon Lockwood Advisers, helping to manage nearly eight billion dollars

of customer assets. He says, look at gold, high grade corporate debt, and small cap stocks. Hello everybody, and welcome. I want to bring you in Dr David Kelly, he really knows how to CHRISTI wait a minute. You have to tell people you were hosting an amazing path at all at the b n Y Melon inside and Dr David Kelly was on it. And he always does a wonderful job at crystallizing and sort of distilling complicated economic issues into wonderful metaphors that actually ring home. He is

chief Global Strategist at Jpmorkan Asset Management. And one thing that you said that really struck me was that you think that investors are being too barished in the short term and too bullish in a long term. Can you explain, Yeah, I think, I think in terms of the short term, we are seeing a real pickup at economic activity, and we've I think economic growth in the second quarter cope as much as four percent. Look at the lowest unemployment

rates since nineteen nine. Earnings this year are going to be up about twenty six percent year over year. These are these are really wonderful numbers. And when you think about the stock market, I would invest in stocks today just because of the money companies are earning right now. Never mind about the future, because right now they're they're generating a no fault of cash that can be paid at in dividends that could be used to stock buybacks.

That's that's all positive. I think. In the long run, though, we have to recognize that that. You know, there's a lot of talking to these days about three percent growth. I think we can do three percent growth for about a year. But because we don't have any growth in the number of our virtually no growth in the population

age sixty four, we're really out of available workers. And so, you know, I think the employery can come down a little bit more, but then it's going to stop and growth has got to slow down to about two percent, and I think, you know, for the long run, we need to recognize that that's where we are. Unless we change our policies with regard to immigration and legal immigration to increase the number of skilled workers in the United States,

we will slow down. But there's also a lot of opportunity overseas, and so I think that in the short run people are being um a little too pessimistic and not giving the market credit for the earnings that companies are earning right now. But in the long run, I think we're we're not recognizing the real structural problems the US economy has, not just around this labor supply, I think, but also around very big budget deficits which are growing. If you want to find out about the health of

the US consumer, where do you go? I go to Costco. It's you know, it's a it's a it's a wonderful place here you I mean you see these mobs of people. I mean they're piled back into the aisles, and then you look at their their cards and they have to push these big, oversized carts and then they pile everything up to a peak. But what what you really should do is look in the carts because people are buying enough mustard for a generation. I mean, why hasn't got

the money? And and so if you want to see mindless consumerism come to Costco, Okay what I asked. I asked it for a reason because I want to get to the point that it is one thing to sit in front of a screen and watch a number. It is another thing to go out into the real economy, in the real world and find out what is new, what is innovative, what people are spending their money on,

what they're not spending their money on. And I'm wondering whether this is something that you in a sense advocate combined with all of your higher level world absolutely, because you look at big numbers and I don't believe in in modeling based on anecdotes, but you can use anecdotal information to really get what's going on. I mean, you try and find a plumber in America today, you can't find one. I mean, you just you know, if you've got a problem right now, they're not going to come

out today. Maybe wait, wait a week, maybe wait two weeks. But the but the problem is where there's a real shortage of skilled workers and you can see that in your day to day life if you actually try and hire something to do a particular job. Um And equally, you know, if if you want to see what's going on with consumer spending, as I say, you can, there are plenty of areas where you can see just how mind to see people spend whatever money is in their pockets,

you know. But just to push back, if you look at it from the other point of view, if you want to just look at anecdotal evidence, there's still a lot of I don't know, pessimism out there among a lot of people. I mean, perhaps it's not captured by some of the economic surveys, but you certainly see this with the birth rate falling off from millennials, and you certainly see this with you know the fact that we aren't seeing wages increase more so, how do you reconcile that? Well,

I think that's true. I mean the gap between rich and poor is growing, and I think it will continue to grow. Uh And and a lot of people are getting left behind. But again we're talking about you know, how do you how do you invest? And and you know, in the in the first quarter, operating earnings are up twenty six percent. In May, wages are up two point eight percent. That's not good for workers, but it's great for shareholders. So it's I think you have to recognize

the economy that that we actually have here. We're just pretty good for corporations. One of the things that you said in the panel that I thought was really interesting was about how people in Sweden managed to equalize the amount of espresso they drink with the amount of vodka they drink in the evenings. Uh. And you're sort of making analogy that we've got this incredible tax plan that's boosting earnings and a really solid corporate backdrop, but we

also have all the uncertainty from trade top. Can you just explain to well, yeah, I mean that's this is this This was mainly a slurn some colleagues of mine from Sweeten nothing not the entire Swedish nation. They appreciate it, but no, I think I think we have a sort of a mixture of Vodican expressing on the economy right now. We've got you know, espresso is clearly a stimulative and we've got all the stimulus from fiscal stiments, which is

very unusual this lations cycle. But we've got this big tax cut, a lot of money in people's pockets, a lot of money in corporate pockets. That's helping the account of me grow. And if it was just for that, the economy probably be overheating. We'd be really worried about inflation. But at the same time, we've got the the the sedative or the vodica if you like, of um, tariff worries, Washington worries, political divide um, and all of that is

creating uncertainty. The problem with uncertainty is the business is you know, when you've got uncertainty, what what? What do people say? Well, let's wait and see. The problems are three most dangerous words and economics I wait and see. If everybody decides to wait and see, what what, this is not good. And so we've actually got this drag from uncertainty which who are a particular round trade policy which is negating some of the stimulus from the fiscal

from the fiscal package. Well, you know, caffeine and alcohol. There are two things that can lead to addiction, right, I mean, you know, if you have a lot of caffeine, you need more and you need to keep it consistent, right, I mean, that's right, And they both have they both have bad long term and that really gets back from

near term. People should be more bullish long term, they should maybe be more bearish because on the fiscal side, we're gonna have, you know, starting in Octobe, where we're gonna have federal defence of over trillion dollars for as far as I can see, that is going to impoverish US in the long run. Um And equally with trade, you know, you want to trade negotiations to result in trade agreements quickly, because uncertainly about trade just means that

I don't know as a corporation. Should should I build a plant in Prioria? Should I build a plant in Poland? I don't know? And if I don't know, I'm not gonna do either. And so so I think both both extra uncertainty from Washington and unwarranted but budget deficits are those are both negatives in the long run to investors make investing too complicated for themselves, and absolutely they do. I think I think I think people need to think about,

you know, for example, emerging markets. I think emerging markets is a great is a people should have in a portfolio right now. But people think, oh, it's too complicated. I have to know about all these things. No, you don't, I mean you don't. You need to have a good manager and let them invest in the forest. I'm not gonna I'm not going to to testify and behalf any individual tree in emerging markets. But the forest will grow, Emerging markets will grow fast, and the rest of the

than to help markets for years to come along. Term investor should have position in emerging markets and just feel comfortable about that rather than trying to nitpick each individual country. He also said that you thought the theme most overvalued asset right now is bitcoin. Yeah, but the problem by bitcoin is I mean, I know, I know a lot of people unfortunately do this, but I want to invest in bitcoin. The problem with bitcoin or any cryptocurrency is

there's no real barrier to entry. Now. I think blockchain technology is obviously a good technology. It's obviously gonna be useful in a a lot of ways, but right now it's you know, Bitcoin is is like the leader, but it's got nothing that's going to maintain its lead. It's got no barrier to entry. It's like you build a new Olympics Olympic stadium and you've got this weekend jog are running around, running around the path, and they look really

good in the stadium. The problem is the varsity teams on a bus headed for the stadium, and when they get there, you know, the weekend jog is not gonna look so good. I think with the problem with something a cryptocurrency is it's not a store of value, it's not a unit of account, it's not a medium of exchange. In the long run, I think blockchain dollars, blockchain the end, blockchain euros will be much better. Best. Thank you very

much for being with us. Dr David Kelly, chief Global Strategist, head of a global market insights strategy team at a JP Morgan Asset Management. I am very pleased to bring in Phil Orlando, chief equity market striate just at Federated joining us here in Orlando, Florida. Do you feel a particular affinity to Orlando is in Orlando, Yeah, do you feel like the city firth to you to answer that question.

It creates a lot of confusion with T s A and hotel check in clerks and all sorts of So I want to start with a question, a kind of existential question it's been plaguing in the market, which is is this as good as it gets? With earnings? First of all, I want to say, you did a superb job moderating the panel this morning with with Rinehart and David Kelly. Uh, really good job. And and this was a topic that you touched on, uh with with your panelists this morning. Uh you talk about is your question

is this as good as it gets? I would actually take the other side of the argument that I don't think the market believes a lot of what they see. We think that the stronger economic growth, stronger earnings growth, all of that in fact is sustainable, and the market's not as as a bulliant as it should be because they don't think that any of this is gonna last and it's all ephemeral and it's just gonna disappear. Um.

So I I you know our view. We've got a thirty one forecast for the SMP five by the end of this year. We think there's gonna be a strong fourth quarter rally once we get through the summer period where there's gonna be a lot of concern about the midterm elections and uh, what's the Fed doing? Are they eventually going to overshoot? What's their policy going to be? Uh? This pop and first quarter earnings is that sustainable? This pop that we think we're going to see in second

quarter g d P is that sustainable. Everyone's assuming that that all of this is just a flash in the pan. It ends badly. Um, we think that that that we're putting in place a foundation that's gonna get us back to trend line or better economic growth. We're looking at at corporate earnings growth that hasn't been this good in seven or eight years, and and the market needs to be more excited about this, and I think eventually they will. Today's not that day. So you think we're gonna get

another six points on the uh? So we're sitting in about okay points so so, and we think that the back of that is going to be a very strong fourth quarter. Ralty that that when you study the history that this year calendaren there's a very unusual confluence of three seasonal events. The selling man go away thing happens every year. We know about that um but this is also the second year of the four year presidential election cycle, tends to be very volatile of stocks. And we've had

a leadership transition at the Federal Reserve. Now the Fed's been around a hundred years, has only been sixteen chairman.

But the market has a very distinct trading pattern whenever we change horses, and and when when these three things come together, they've only come together six times in the last eighty five years or so, and and the previous five times you've had this sort of barbell shaped year where we started the year in good shape, there's a lot of volatility and instability in the middle of the year, and then we ended the year in really great shape.

I think we're going through that that instability period right now in terms of what's gonna happen with the midterm elections, what's gonna happen with the Fed. We've got another f MC meeting coming up next week. All right, we think there's gonna be a quarter point hike. I think that's a fairly consensus view. But the question from then is what do the dots look like. What's the FEDS policy prescription gonna be over the course of the next eighteen

months or so? Will they overtight? We don't know the answers to that. Well, it's just about a minute to go here. I'm wondering what your perspective is, given the fact that you expect a strong fourth quarter rally. Does the FED matter for that considering the fact that people are pricing in or are talking about certainly four rate hips is here, Well, it absolutely matters because our forecast

is only three rate hikes. Uh So, so if we're wrong and and the Fed is gonna give us four or more, um, you know, there's been a rumor that, uh, you know j Powell one of the things he's thinking about is is sort of scrapping Janny Yellen's idea of only four press conferences, going to eight press conferences. And uh.

The reason why that's significant is that the market has gotten into their head that only a press conference, only a pressor only a meeting with the presser's a live meeting, and that we're not going to do anything and the other meeting. Now that's not necessarily right, but Powell wants to strip that thought process away from the market and say, okay, every time we meet every six weeks for an f

MC meeting, we might do something. And and the reason that Yelling apparently didn't want to do press there's every time is that it's a lot of work to prepare for them. We are broadcasting from b n Y Melon Inside in Orlando, and joining us, of course, is Phil Orlando, chief equity market strategist at Federated UH. Phil, let's talk about small and mid cap stocks for just a second. I was looking at the Russell two thousands up eight

and a half percent so far this year. UH. Is it because they are more domestically focused or is it because they just didn't get any love previously? Combination of the two. This has been one of our biggest calls. We went to a table pounding burn yourself at the stake by on small caps last fall and there were

probably a half a dozen key reasons. At the top of the list was the fact that the U. S economy, corporate earnings economic growth was starting to really perk up, and a small cap company typically does eighty percent or so of their business here, so theoretically that was going to benefit them Uh, if we were right that the economy and the corporate earnings we're gonna get stronger, that meant that the Fed was probably going to accelerate its

tightening policy. That's happened, which meant that the dollar was going to finally catch a bit. Now. Remember dollar euro had gone from one oh three to one twenty five or so over the course of last year. We thought that was overdone and that we should have seen a rally back to about the one fifteen level or so. So we're sitting in about one see eighteen or so right now. The strength in the dollar should benefit small cap companies, just as the weaker dollar tends to benefit

large cap companies. It makes their goods and services cheaper as they're exporting them overseas. Half or more of a large cap company stuff is done overseas. So the stronger dollar, based upon those other things was going to benefit small caps. So I'm just wondering before we move on to some of the other sectors, I'm just wondering a lot of people think that the dollar is gonna weaken again, probably in six months, maybe a year, as people start to

realize how deep the deficits really are. Do you agree, and when would you consider start taking starting to take some risk out of small caps. So I'm not sure that I fully agree with that assessment. I am concerned

about the debt and the deficit levels, no question. But Dan Clifton over at Strategos put out a note a week or so ago saying that when we start to get some of the data out of the government this year in terms of how much the federal tax revenue has increased because economic growth is better, capital gains taxes are better, etcetera, and and how much some of that has been applied to the debt and the depth said

the numbers, he said, will look better. We as an investment community don't really have an appreciation of that because right now we're just speculating. So you think that the small caps have have a pretty long run ahead of them, It sounds like absolutely what about tech stocks because they have been reaching record highs and I'm just wondering how you're thinking about that. So we we love tech through last year into the first quarter of this year, and

then sort of went neutral. I guess as the market was sort of peaking in that late January early February standpoint. The reason for that valuation appeared to us to be a little ahead of itself, and large cap world generally had outperformed large cap value by about twenty five percentage points over the course of seventeen in the first part of eighteen. Now, that's a one standard deviation event that has only occurred five times in the last forty years or so, So it appeared to us that growth was

ahead of itself. Now, in those other four instances, when that inflection point came and money were starting to rotate back into value, the value had a phenomenal run. And and so we think we're at one of those inflection points now. And so we've been overweight energy stocks, financial service stocks, and industrial stocks in the domestic market as

a result of that. I'm gonna throw a little bit of a curveball here, because, uh, we're talking about all of this in the context of this conference and people planning for their financial future and trying to uh in some way, not to simplify it, but make it applicable to their personal situation. Social security, right is a big part of people's retirement plan. Whether you have a lot of money or a little money, you're kind of in your mind have this notion you're going to get your

social Security check. This is the first time since n two that the government's having to dip into the trust fund in order to fund social security payments. Right, what do you say to people who are using social security as the first piece of the bigger puzzle of a retirement plan. Well, if it's the only piece, um, I

would be a little nervous. I think it's part of a mosaic that you've got your your four oh one k uh, You've got your I rara, you've got your Social Security, You've you've got some some some savings, you've got the equity in your house. All of that together, people should be fine if if you've done thing other than continue to hope and pray and light candles that the government will continue to, you know, be able to

support you with your social Security checks. I think that's a risky strategy because we've got to address, in my opinion, the unsustainable trajectory of entitlements at some point in the future. I don't know that today is that day, because I don't think we have the right mix of government officials with the backbone and the vision to be able to fix the problem. But but this problem is getting progressively

worse every day. Uh. And and if I were sitting in the White House right now, I'd be trying to put together a plan that that brings the best thinking of both sides to compromise on the issue that that we've got to do some things to recognize better health UH, longer UH retirement ages UH means testing of benefits for the super wealthy, increasing the tax base. There's a bunch of different things that we need to do in order to get Social Security on a more sustainable footage. Thank

you so much for being with us, Phil Orlando. Always wonderful to get your insights, especially in the town that was named after you. Phil Orlando, chief equity market strategist at Federated ruling over his roost here at the Insight Conference in Orland. So thank you so much for having me. This was this was a thrill to be with you, guys. Our next guest spent more than two decades at the Federal Reserve in a variety of capacities. He now serves as the chief economist at Standish, which is part of

b n Y Melan Asset Management. I want to bring in vincent Reinhardt thank you so much for joining us. Really a pleasure having you for having me. I want to start with a lot of some of the handwringing in the economics profession right now. Is the Phillips curve dead? Uh? Can we throw away the yield curve as it flattens and disregarded even though in the past it's been a telling indicator of recessions. What do you think the biggest thing is right now that the economics professional economists are

getting wrong? First thing they remember is all that handwringing. Notwithstanding at the end you have to go back to certain mechanisms because that's what keeps your understanding and the U of the world in motion. Uh. To me, I think the biggest thing the brethren get wrong is that the rest of the world is bigger and it doesn't act exactly like us. That a lot of macroeconomists are used to a closed form representation of the US economy

and much more comfortable of that. But the plain fact is we went from something like um emerging markets being a third of the UH Federal Reserved Exchange Rate Index to being more like seventy of the of the Federal Reserves Exchange Rate Index. So what's the practical implication of that? I mean, how does that factor into sort of the

everyday existence of Americans. So it's a couple things. One is, it's probably why they're so uh so much pressure keeping inflation from going up even though there's evident resource pressure, because the rest of the world is there meets somewhere our demand. Because the rest of world also doesn't act like us. Uh. Emerging markets in particular try to limit their fluctuations of their exchange rate piece of FISA dollar. That implies that major currencies aren't as important as they

used to be. Have we become more isolated in our thinking? I think we didn't change and therefore are relatively more isolated than we should should have. I e. If you missed the fact that China is the largest economy in terms of international purchasing power, you're you're gonna you're you're gonna be missing out on on on the explanation. Great example. We know from the minutes that back in January, the f m C had a long discussion about inflation determination.

They put a page and a half in the FLM scene in its I used to sign those for six or seven years. That's a lot. That's a big footprint. Over those page and a half you will find nowhere global supply chain, rest of the world, exchange value of

the dollar. It was all domestic center. So uh, you know, we spoke about this earlier, but scottman Ard of Googgenheim came out and today said that the flattening yield curve now at the flattester about since two thousand seven, is an indicator that we're getting closer to the end of this cycle, that we're probably within two years of a recession. Do you agree? So I can say the easy thing, and that is the U S economy is dynamic. In the post war period, about fifteen percent of the years

had recessions in them. So if you're asking me for a multi year forecast, there's gotta be a probability of recession in there. Now does the yield? Is the yield nerve as scary as it used to be? And I think the answers know. And the reason is yield curve used to be very scary because if short rates were below long rates, it meant that long rates incorporated the expectation of the FED easy. If short rates were real high,

it meant the FED had a tight policy. So what gets the FED from tight too easy a recession and so therefore it was good at predicting a recession. What's the difference now, and that is long rates always incorporated term premium, the scarcity you know, uh value associated with holding treasury securities. Well, treasuries are really really scarce because

the feder reserve and foreign official accounts hold them. In that environment, estimates of the term premium are actually negative, so it's not as big as signal about a future FED mistake when long rates are low relative to short rates. You've heard the phrase the generals fight the last war? Have economists and politicians are they fighting the last war?

Particularly on trade? Rather than figuring out how to live in a world where China is, as you described as dominant our we seem to be fighting skirmishes at the edges to try to satisfy some nostalgic version of what we think the world ought to look like. I think a good way to frame it is we're still thinking about the accomplishment of bringing China into the global trading order with their accession to the World Trading Organization, and

we're all backslapped and saying that's a real accomplishment. What we aren't thinking about was exactly who we brought into that world trading organization, that global system. It's somebody. It's a country that has a much more longer term focused than us, that has a desire to um get market share and get the technology that we've gotten. It's not the same kind of trading partner that that that you

write down in most economic bombs. You know. We also we hit on our emerging markets earlier in Turkey's central bank earlier today's surprise the market by raising interest rates, the main interest rate to nearly eighteen percent. They just had a near record amount of inflation over the past year. How are you thinking about emerging markets right now? Well, and by the way, the Argentine Central Bank went up.

And those two examples are just great to teach in a classroom on financial crisis because it tells you about the impossibility of an interest rate defense. You're trying to hold your exchange rate and you're going to do it

by raised raising your domestic rate. Well, the problem is that's not real credible because the more and more you jack up your your policy rate to lessen the pressures on the exchange rate, the more likely you're killing your own economy, the more likely you're gonna get replaced, the more likely it's not going to be sustained. So in fact, the need to do something that dramatic is read by

investors is saying there's something dramatic underneath. Well, and certainly there is, but I'm just wondering, you know, given the fact that we're seeing Argentina, Turkey, Brazil kind of suffering with their currency falling out of bed a bit, you know, is this sort of indicating a bigger issue at this point. So Brazil is a good example where it wasn't an interest rate defense. They didn't lower rates when they had the opportunity, and and an opportunity they took that Argentina

didn't take was they built up more reserves. So they're a little distinct. But guess what they've got political risk to They're also going to be a source of uncertain The scary thing about this is it wasn't much of a backup and interest rates that exposed the pressure US interest rates that exposed pressure on e M and who did markets focus on. It focused on the economies that

had ongoing budget deficits, and current account deficits. Market participants are not your friend when they're worried about funding your ongoing obligations. And that's something officials forgot over the prior couple of years when it was so easy to sell long term securities. Ten seconds. What is Vincent Reinhart reading at the beach this summer reading at the beach. I'm catching up on a bunch of old his Mark Twain books. Thanks very much for being with us, Thanks for having

always a pleasure. Vincent Reinhardt is the chief economist of what He's got a quadruple mandate Standish Melon Capital, the Boston Company Asset Management, and b n Y Melon Asset Management North America. Thanks for listening to the Bloomberg P and L podcast. You can subscribe and listen to interviews at Apple Podcasts, SoundCloud, or whatever podcast platform you prefer. I'm pim Fox. I'm on Twitter at pim Fox. I'm

on Twitter at Lisa abramowits one before the podcast. You can always hatch us worldwide on Bloomberg radioh